- Chinese law provides two routes for obtaining relief from patent infringement: through the administrative state bodies responsible for patent matters or through the court system. Administrative action is usually less effective in patent cases than for other intellectual property (IP) rights infringement cases due to the technical complexity of the subject matter. Administrative authorities will generally refer to court all but the most straightforward patent cases.
- Preliminary and pre-litigation injunctive relief is available, together with orders for the pre-litigation preservation of evidence.
- Parties, in principle, need disclose only those documents on which they rely. Documents are routinely challenged on the slightest technicality. Important evidence should be notarised to minimise objections (and must be legalised at a Chinese consulate if it originates from outside China).
- Disputed technical issues are dealt with by court-appointed experts, who may be cross-examined at trial.
- Validity and infringement are dealt with in separate proceedings (a bifurcated system).
- Only 62 out of the 350 or so intermediate people’s courts that are competent to hear IP disputes have the jurisdiction to hear patent infringement disputes. These are in Beijing, Tianjin, Shanghai, Chongqing, the provincial capitals and some of the more developed cities.
- The first-instance trial for a standard patent infringement case usually takes between six and 12 months in most Chinese courts and the secondinstance trial usually takes another six months.
- The costs involved in Chinese patent infringement cases vary depending on the complexity and length of the case; however, costs are usually moderate by international standards. The losing party generally bears the costs of the action.
Basic Principles of Patent Litigation in China
The Bifurcated System
In China, issues of validity and infringement are dealt with separately. Infringement is dealt with by the administrative authorities (the relevant provincial or local branch of the State Intellectual Property Office) or the courts. Validity is dealt with exclusively in Beijing by the Patent Re-examination Board (PRB) of the State Intellectual Property Office. Decisions of the PRB can be appealed to the intermediate people’s courts in Beijing.
If a party wishes to contest the validity of a patent, it can apply for the stay of any pending infringement proceedings but stays are not automatically granted. Invalidation proceedings generally take between 12 and 24 months at the PRB and a further six to 12 months if then appealed to the court. Proceedings for infringement of invention patents will rarely be stayed, due to the substantive examination process already undertaken for registration purposes. Proceedings for infringement of design patents (akin to registered designs in other jurisdictions) and utility model patents will more often be stayed, unless the patentee has obtained in advance a positive preliminary search report from the patent office. Chinese design and utility model patents are only summarily examined for registration purposes.
Patent infringement claims must be brought before the intermediate people’s courts competent for patent matters. Only 62 intermediate people’s courts are specifically authorised to hear patent disputes (compared with the 350 or so that are also authorised to hear trade mark and copyright disputes). These patent-authorised courts are in Beijing, Tianjin, Shanghai, Chongqing, each of the provincial capitals and certain other developed cities. An applicant can start proceedings in an intermediate people’s court in the capital city of the province where the defendant is based or the capital city of a province in which infringing activities are taking place. This means that if the allegedly infringing products are being distributed nationally, the plaintiff may have a choice of forum.
Generally, a panel of three judges will be appointed to hear a patent infringement case. The role of the judges in China is much more active and inquisitorial than in common law courts. For instance, Chinese judges will regularly call informal pre-hearings with legal counsel and can request and challenge evidence, question witnesses and consult experts.
Although parties may represent themselves in patent infringement actions, if they choose to be represented by a lawyer only Chinese-qualified and registered lawyers may appear before a Chinese court. Foreign lawyers are permitted to attend hearings but may not appear for their clients.
Progressing a Patent litigation case
Actions are begun by filing a statement of claim with the court. The statement of claim must specify the legal claim, supporting facts, the evidence that will be referred to and where it was sourced from, the names and domicile of witnesses and details of the claimant. The court must first accept the case formally. It will examine the statement of claim to ensure all formalities have been strictly complied with and will refuse acceptance on the slightest technicality. If accepted, a notice of acceptance will be issued with a notification of the appointment of the panel of judges. The court will send a copy of the statement of claim and these two notifications to the defendant, who then has 15 days (30 days in a foreign-related case) to file a defence. The defendant can request an extension of time and will normally be granted up to a further 30 days on a first request.
After receiving the defence and serving it on the plaintiff, the court will review the pleadings and may conduct its own further investigation if necessary.
The parties may agree a timetable for the submission and exchange of evidence. This timetable must be approved by the court. In the absence of agreement the court will set a timetable, which usually allows 30 days for submission of evidence to the court from the later of the service of the defence or the formal acceptance of the case. The court serves evidence on the other party. The exchange of evidence provides an opportunity for the parties to review and gain an understanding of their respective cases and supporting evidence. A member of the judges’ panel will supervise the process of exchanging evidence and help the parties to distil the main issues between them. There will usually be a series of pre-hearings during which each party challenges the admissibility of evidence presented by the other side on technical procedural grounds. These procedural hearings are meant to be restricted to evidential matters but the judges regularly use these informal meetings to ask the parties their own questions and generally educate themselves on the technology and the parties’ arguments.
The timetable for cases involving foreign-related parties is not prescribed by the rules and is a matter on which submissions can be made to the court.
If technical questions remain unclear or disputed, the court may appoint one or more experts. Some jurisdictions are more developed than others and have pre-selected panels of available experts. Beijing, for example, has panels established for eight technology sectors, with up to 50 experts on each panel. The usual procedure is that the parties may agree the relevant panel, failing which the court will choose. The parties are then permitted to veto some experts from that panel on grounds of connections to the other party, bias etc. Finally, the court will select up to five of the remaining experts. The parties will not know until trial which experts have been selected. The experts will produce a technical report for the court.
Once the court has completed its investigations, it will set a date for the trial hearing. Unless a party has requested a closed proceeding to protect confidential subject matter, all hearings are in public. In practice, attendees from overseas must notify the court in advance of their attendance.
At the hearing, both parties formally present their arguments and evidence. Any court-appointed expert must attend and may be cross-examined by the parties and the judges. There may be more than one hearing for trial and, if the court believes it necessary, it may adjourn the hearing and order its own technical tests to be carried out.
A straightforward patent infringement action in most courts in China will generally take 6-12 months, but can be longer in the more popular courts (for example, 12-24 months is typical in Beijing). For purely domestic cases, the judges are under fairly strong pressure from the courts to conclude cases within prescribed time limits, but for foreign-related cases there is no fixed time frame.
Basic Litigation Procedure (View flow chart)
Pre-litigation and preliminary injunctions are available to patent owners and other interested parties for patent infringement.
Interim injunctive relief in patent cases is relatively new in China. It was introduced in mid-2001 to comply with the World Trade Organisation’s (WTO) Agreement on Trade Related Aspects of Intellectual Property, for China’s entry to the WTO. Some of the Chinese courts can still be reluctant to grant interim injunctions in patent matters due to the technical complexity of patent cases. This varies from jurisdiction to jurisdiction within China and forum shopping can therefore be very important for interim relief.
Exclusive licensees may apply independently to the court for interim relief but other licensees may apply only if they join the patent owner in the proceedings.
The court is meant to make a decision on a preliminary injunction application within 48 hours of acceptance of the application. However, it may take more time if it needs to verify facts or hear further submissions. In practice, a ruling can take anything from 48 hours to three or four weeks. One week is usually considered fairly swift.
A successful applicant for pre-litigation relief must start main infringement proceedings against the defendant within 15 days of the ruling or the court will lift the injunction.
The applicant must be able to satisfy the court that, if the injunction is not granted, he will suffer damage that will be difficult to remedy in damages (ie irreparable harm). This harm will not be presumed by Chinese courts. The Chinese regulations do not make any express provision regarding the time within which an application ought to be made but a delay on the applicant’s part can signal to the court that any damage will not be serious enough to warrant an injunction.
An applicant must provide security or the application may be dismissed. The amount of security required will be assessed by the court and is meant to cover the direct losses that the defendant may suffer from complying with the preliminary injunction.
Security can be provided in cash or may take the form of a guarantee, mortgage, lien or deposit. If it is provided in cash, the court will normally provide a nominated court account at a local bank.
]No appeal to a higher court on rulings on preliminary applications is available.
However, an application for a ‘review’ may be submitted to a specially commissioned board from the intermediate people’s court within 10 days of receipt of the ruling. This is not usually recommended in foreign-related cases because the judges can be expected to have already conferred internally and reached a prior consensus if an overseas party is involved.
The limitation period for instituting legal proceedings for patent infringement in China is two years from the date when the patentee or any interested party obtains knowledge of the infringement or the date when they should have obtained such knowledge.
Chinese civil procedure does not provide for any pre-trial discovery of documents and the parties are not required to disclose all relevant documents in their possession. The parties are free to choose which documents they wish to disclose.
Chinese courts do, however, generally take an active, inquisitorial role in proceedings and may themselves request (but usually not compel) the production of documents and articles. They may also conduct inspections of premises. Where a party is able clearly to identify the existence, relevance and location of documents of the other side, it can ask the court to request their production. In practice, this is rare.
Evidence obtained during the course of administrative enforcement action may also be used in subsequent court proceedings. This can frequently be a good means of obtaining relevant documents in advance from a defendant.
Burden of Prood and Evidence
The patent owner has the burden of proving the facts to satisfy its claim. This is reversed for a claim against a manufacturer for infringement by production of a product by a patented process, in which case it is for the defendant to prove that the manufacturing process it uses is different from the patented process.
All facts of the case, including relevant technical aspects, must be presented and supported by suitable means of proof, such as notarised reports of product purchase and testing. The applicant must submit evidence of its rights in the patent. This can require, for instance, the original patent certificate, the patent description and claims, the receipt for payment of annual patent fees and, where appropriate, any relevant licence agreement and the original certificate of registration of the licence. Clear evidence of the identity of the applicant (such as a certificate of incorporation) and the respondent (such as business registration records) must be provided.
Original evidence should be produced, although copies will be accepted where good reasons are given. Where evidentiary documents are in a foreign language, Chinese translations must also be provided to the court. As mentioned above, the courts themselves may request the production of particular pieces of evidence. They may compel the production of such evidence but only when this is considered to be in the interest of the state or the public.
Important evidence should be notarised to make it more difficult to challenge. If evidence originates from outside China it must also be legalised at the relevant Chinese consulate. The time needed for this should not be underestimated. It can make for a time-consuming evidence-collection process but can also be advantageous because, once notarised and legalised, some overseas evidence can carry much greater weight in China than might be given to similar material in jurisdictions outside China.
The use of testimony from witnesses is a relatively new development in China. However, it is now a rule that evidence from a witness must be provided to the court in person to be admissible (unless there is an acceptable reason why the witness cannot attend).
An interesting aspect of Chinese civil procedure law is that the court may allow witnesses to cross-examine each other.
The court will generally attribute less weight to statements made by officers and employees of the litigants and greater weight to statements provided by unrelated third parties.
Expert evidence may be used but if technical issues remain in dispute the court will appoint its own expert. The parties may be able to agree on the choice of expert for the court but if they cannot the court will make its own choice of appointment. Some jurisdictions in China are more developed than others in relation to experts and already have established panels for particular technology sectors. The expert will submit a written report and will appear in the oral hearing to explain the report.
Court-appointed experts can be cross-examined by the parties and the judges at trial.
Costs will generally be awarded to the successful party.
Costs are divided into court fees (usually recoverable in full), attorneys’ fees and other expenditure. The court will usually make a determination of attorneys’ fees based on domestic, non-specialist Chinese lawyers’ rates. The actual amount recovered for attorneys’ fees in China is usually very low by international standards.
Disbursements such as investigators’ fees and experts’ fees are usually recoverable in full provided that proper evidence of payment is submitted.
A losing defendant will normally be ordered to stop infringing the patent by, for example, offering for sale and/or manufacturing the infringing product or using a process determined as infringing. The order will usually follow the infringing acts that are alleged in the statement of claim. The injunction remains in place for the remaining life of the patent and will not be stayed pending an appeal.
The court will assess damages on the basis of the claimant’s losses or the defendant’s profits. If there are appropriate documents on which to base such an assessment, the successful party may apply for the court to audit the documents and assess the damages.
If it is not possible to determine damages on either of these bases and there is a relevant and reasonable patent licensing fee that can be referred to, the court will impose damages based on a multiple of one to three times such royalties. The multiple used will depend on the kind of patent and the nature and seriousness of the infringement.
If there is no reasonable patent licensing fee that can be referred to, the court can instead impose statutory damages of up to RMB500,000 (approximately US$66,000). In practice, because there is no discovery of documents, statutory damages are the usual basis of assessment. The court will consider factors such as the period of trading, the price at which the infringing product was sold and the production capacity of the defendant in exercising its discretion to award statutory damages.
The level of damage awards in IP cases in China has been enhanced gradually. Recent decisions have shown that the Chinese courts will make substantial awards in appropriate circumstances.
The Chinese legal system is a civil law system. It has the following principal features:
- the courts are not bound by earlier decisions of the same or other courts. However, a decision on a comparable issue established by the Supreme People’s Court will in practice be observed by the lower courts; and
- the Chinese court system is based on a four-tier model.
The four tiers are: the primary people’s courts (approximately 3,135), the intermediate people’s courts (346), the high people’s courts (32, in the provincial capitals) and the Supreme People’s Court (one, in Beijing). Only certain courts at the intermediate people’s court level (a total of 62) are competent to hear first-instance patent-related matters.
The high people’s courts, and the Supreme People’s Court in very exceptional cases, are permitted to hear first-instance proceedings in very high-value cases (exceeding US$12m) or cases of particular public importance and they can order the lower courts to transfer such important first-instance cases up to them.
An appeal against a decision of the intermediate people’s courts may be brought before the high people’s courts, from where there is a final appeal to the Supreme People’s Court in Beijing. The latter appeal focuses on matters of law rather than facts. The high people’s courts and Supreme People’s Court have specialist divisions or tribunals, of which IP comprises the third civil division.
Rights of Audience
Only registered lawyers from the People’s Republic of China may appear before the Chinese people’s courts. It is a national registration, so lawyers can appear in all the courts in any jurisdiction within China. Chinese lawyers from the two major cities Beijing and Shanghai tend to be more experienced in patent matters and it is quite common for them to appear even in the provincial courts. There is still a noticeable tendency for provincial judges to show greater deference when hearing arguments that are put by lawyers who have flown in especially for the case from Beijing. The legal and judicial professions in China are still in their relative infancy, having been all but wiped out before 1978 by several decades of political upheaval. Many of the judges appointed during the 1980s had limited legal training and tended to be political and military appointments. There is now a national examination for judges and quality is steadily improving.
Typically, an overseas party’s patent litigation team in China will include international patent counsel, based in Hong Kong or China, to act as the focal point and to guide the strategic decisions on the case and monitor the day-to-day conduct of the action, working closely with PRC-registered lawyers who will be on the court record and who will appear before the judges. The team may well also retain its own experts and/or patent agents to advise on the technical issues and assist with preparing technical arguments. Since the court will appoint its own expert(s) if technical matters remain in dispute, the parties’ own technical advisers do not have to be independent, so may be provided in-house.
The general rule is that proceedings may be brought in the jurisdiction within China where the defendant is based or where the infringing acts are occurring. This permits forum shopping among the various courts within China when the alleged infringing acts are committed nationally.
Once a judgment has been obtained in a Chinese court, it is in principle readily enforceable throughout China. Individuals have one year from the date of a judgment in which to enforce it. The corresponding period for corporations is six months.